French presidency backs tie-up of EDF-Areva reactor businesses

3rd June 2015, 0 comments

The French presidency on Wednesday gave its backing to a tie-up between state-owned electricity group EDF and Areva's reactor-building unit, adding that the government would spend "as much as necessary" to recapitalise the troubled nuclear group.

The Elysee said EDF was set to become "a majority shareholder" in Areva's reactor subsidiary, Areva NP, in what could signal a considerable restructuring of the nation's energy sector.

"From now on, the activities of design, project management and marketing of the new EDF and Areva reactors will be brought together in one dedicated company," it said in a statement.

The government's green light was announced after a meeting earlier in the day between French President Francois Hollande, Prime Minister Manuel Valls and ministers of four interested departments.

Once a formidable leader of the world's nuclear energy market, Areva has been plagued by years of technical problems in its new generation EPR reactors that have led to construction delays, cost over-runs and project cancellations by clients.

The company, 87-percent owned by the French state, has also suffered as interest in nuclear power has cooled following the 2011 Fukushima catastrophe in Japan.

The Elysee announcement also committed the state to recapitalising the beleaguered nuclear group as much as necessary after it incurred record losses last year.

"The challenge isn't merely to respond to financial difficulties that Areva might encounter, but to restructure the entire sector and give it a new outlook," said an official close to President Francois Hollande.

Areva referred to the announcement as "a series of guidelines to renew the French nuclear industry" and said in a statement that it would "work in complete cooperation with EDF on the roadmap as it is defined".

EDF did not immediately comment on the decision.

But according to French daily Les Echos, the electricity giant has offered to pay just over two billion euros ($2.2 billion) to become the main owner of Areva NP, a figure that has been neither confirmed nor denied by the two companies involved.

In March, Areva reported net losses in 2014 of 4.8 billion euros after it was forced to absorb costs linked to delays, and said it would make savings worth around one billion euros over the next few years.

In May, Areva, which was created in 2001, said it would cut up to 6,000 jobs worldwide as it seeks to slash its costs by a billion euros by 2017.

Areva NP, the reactor subsidiary, employs around 15,000 of Areva's total workforce of around 45,000.

In reference to negotiations with trade unions, Areva said it was committed to discussions with "social partners" over changes to the company.

The affected trade unions are opposed to the plan with CFDT union coordinator Jean-Pierre Bachmann accusing EDF of "pillaging the tomb" of Areva.

The merger of reactor operations might attract other potential investors to Areva.

The maintenance and repair of existing reactors -- an area of regular revenue and high margins -- is likely to be of interest to the likes of French electricity and gas company Engie.

French media also suggested that Chinese investors may be interested in whatever minority stake Areva will end up with in the new set up.